Knaub & Company, P.C.

May 2018

Easier to become a 501(C)(3)

The Internal Revenue Service revised an application and instructions that small charities must use to qualify for tax-exempt status. The IRS requires exemption-seeking applicants with assets under $250,000 and annual receipts under $50,000 to file Form 1023-EZ, Streamlined Application for Recognition of Exemption.

MORE ACCURATE INFORMATION

There are two major changes to the application. One change is a text box added to Part III of the application that requests a brief description of the organization’s mission or most significant activities. This change, recommended by the IRS National Taxpayer Advocate, is designed to provide a better understanding of an applicant’s most significant activities. The other change is an addition that involves both the application and worksheet. The application now asks questions about annual gross receipts, total assets and the public charity classification of the applicant.

These changes may reduce the time needed to gain 501(c)(3) status, which typically takes three to six months but can take longer when follow-up is needed.

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